The local stock market will take cues this week from the US Federal Reserve’s first round of Federal Open Market Committee meeting as well as the release of the Philippines’ fourth quarter gross domestic product data.
“The Fed's first round of FOMC this year on Jan 25-26 (statement out on the 27th) is likely to pull focus next week,” said online brokerage 2TradeAsia.com.
It noted that, “Markets have already started to move in anticipation of a tightening: US treasury yields have jumped to 2-year highs, the greenback has gained momentum, and equities are discounting tighter monetary environment.”
Higher rates may also prompt outflows out of emerging markets in Asia, as regional central banks now have to contend with parities versus the Fed, on top of inflation worries of their own.
“The silver lining is that labor issues as of present and expectations that inflation will normalize by end-2022 bar the Fed from raising rates too high, too soon,” 2TradeAsia.com said.
It also pointed out that, “Big picture thinking will likewise be thematic for local equities next week, on the release of fourth quarter 2021 GDP numbers.”
While it is expected to tilt on the higher side (from 7.1 percent in the third quarter despite reimposition of ECQ in August) courtesy of relaxed quarantine measures versus the same period in 2020, 2TradeAsia.com said the Omicron variant creeping in late fourth quarter to date will skew the outlook for the next print.
“It will be interesting how the rest of the first quarter of 2022 will play out given the lack of base-effect advantage and stymied mobility for a third of the quarter, but broad-based performance will likely be dependent on the COVID-19 infection curve which, fortunately, has begun to turn for the better,” it said.
The brokerage advises investors that, “hedging exposure may be warranted in the near- to medium-term, especially against rate-sensitive sectors and issues with highly leveraged balance sheets.”
BDO Chief Market Strategist Jonathan Ravelas noted that, “Market barometer PSEi was almost unchanged last week at 7,293.52 as investors positioned ahead of the release of the fourth quarter 2021 GDP data this week.”
He added that, “(Last) week’s close at 7,293.52 continues to highlight further consolidation within the 7,000 to 7,350 levels in the near-term. However, a sustained fall below the 6,950 levels will call the bears to test the 6,500 to 6,800 levels.”
Abacus Securities Corporation said Figaro Coffee Group is listing its shares at the Philippine Stock Exchange on Monday, Jan. 24, 2021, and noted that, “We may expect some volatility in its share price. We continue to like the long-term prospects of FCG and reiterate our target price of P1.34 per share.”
The brokerage also noted that, Puregold Price Club’s share price has fallen 6.5 percent so far this year and is one of the top foreign sold names.
“PGOLD looks to benefit from the improving consumer confidence and the increased spending in the upcoming elections. Remain buy,” Abacus said.
Meanwhile, COL Financial has a BUY recommendation for cement makers Cemex Holdings Philippines Inc. and Eagle Cement Corporation as it expects the construction industry’s recovery to gain momentum.
“Note that for the first nine months of 2021, the construction industry grew by 9.0 percent, a reversal compared to the 28.0 percent contraction registered in the same period in 2020. The growth in 2021 was mainly driven by public construction, which increased by 42.5 percent, as the government accelerated spending on infrastructure projects,” it explained.
This year’s infra budget allocation is at P1.2 trillion, 9.9 percent higher compared to last year’s allocation.
Aside from government infra spending, COL said “We expect private construction to recover this year and grow with the economy.”